Rollover IRA

If you have changed jobs or retired recently, you can make your transition easier by creating an IRA Rollover account, rolling your funds over from a qualified retirement plan, such as a 401(k). The entire amount, including all earnings, will keep your money working hard for you – tax deferred – until you need it; this is usually during your retirement years when you may be in a lower tax bracket. Even if you will be in the same or a higher tax bracket at retirement, you may still benefit by allowing your retirement assets to compound in a tax-deferred account.

Contribution Limits

There is no limit on the amount that can be rolled over into an IRA and, when done properly, there is no tax liability. Having one IRA Rollover holding all retirement assets typically is more efficient to manage than having several retirement plans after a few job changes. Another benefit is gaining more investment choices because some employer retirement plans have limited investment options.

Understand Your Rollover Options

How you handle your assets from your previous employer’s qualified retirement plan can dramatically affect your future IRA savings.

Indirect Rollover
You can elect to take a cash distribution and then deposit the money into your IRA within 60 days. However, your employer is still required to withhold 20 percent for prepayment of federal income taxes. As such, to avoid taxes and penalties, the entire distribution, including the 20 percent withheld for income taxes, must be deposited into your IRA. If any amount , including the 20 percent withholding, is not rolled over within 60 days, then that amount will be subject to taxes and possible IRS penalties.

Direct Rollover
With a direct rollover, you authorize your employer to make your check payable directly to the new custodian for the benefit of your IRA. There is no tax withholding, no taxes, and no penalties with this option, and your retirement savings will continue to grow tax-deferred. In most situations, a direct rollover makes the most sense since it avoids potential tax liabilities and penalties.

Payout Flexibility

If you’re between the ages of 59½ and 70½, you can withdraw what you need from your IRA Rollover account at any time. However, after age 70½, current tax laws require you to make minimum withdrawals based on uniform life expectancy tables.

For more information about an IRA Rollover, contact your financial advisor or consult the Internal Revenue Service website at www.irs.gov.

Past performance is no guarantee of future results. The Ivy Funds are managed by Ivy Investment Management Company and distributed by its subsidiary, Ivy Funds Distributor, Inc. Waddell & Reed Financial, Inc., the ultimate parent company of Ivy Funds Distributor, Inc., acquired the investment advisor to the Ivy Funds in December 2002.

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